Fintech or Financial Technologies is the new branch of technology that aims to improve and automate the delivery of financial services. In the beginning, Fintech was employed for the back-end applications of the financial institutes.
But, since then, the technology has taken a diversion towards the consumer-oriented services. Fintech is expected to change the face of the banking sector in the next two decades. Whenever a new technology is introduced, a battle for the market domain is typical between the old guards and new entrants. The story is not different for Fintech.
So many organisations are out there with an opinion that Fintech is going to make a negative impact on the traditional banking services. This article discusses how the Fintech is going to act as an enabler to the traditional banks rather than being a challenge.
The Technological Challenges: Past and Present
In the past, the financial institution has proven to be slow towards the innovation. Yet, showing great resilience towards the challenges in the past. More than 450 attackers such as digital currencies, networks, wallets etc. attempted to challenge the traditional institutes in earlier days. Fewer than 5 of them have survived to the date. Other than PayPal no one has really disrupted the banks.
But the time has changed. The modern markets and new generation banking customers are promoting the new age financial services. Various reports are suggesting that millennials are more faithful towards the Fintech companies than the traditional banks. The expectations of customers are on the rise, and it is favouring the Fintech companies. With the evolution of the digital economy, the rise is expected to continue.
In short, the transformative forces are seemingly unstoppable with the current social environments. The traditional banks need to elevate their digital experience to survive. However, a complete one-on-one competition between traditional banks and Fintech companies is not going to take place.
The progress brought by the Fintech companies presents large opportunities for the traditional banking institutes. Rather than disrupting each other, a collaborative movement can benefit both banks and Fintech companies. Following are the few important ways how Fintech can be used to improve the banking services.
Reduced operational costs – The efficiency of staff and other elements can be increased through Fintech thereby reducing the operating cost.
Expansion – The limitations of the legacy systems can be overcome through the Fintech. This competitive advantage can be used to expand the organisation into foreign markets and new customer segments.
Revenue Growth – The Fintech can be used to scale the less capital-intensive business such as insurance and wealth management.
The Fintech also needs these collaborations to succeed. The regulatory challenges and difficulties with scaling the customer base are a great barrier for Fintech companies to overcome. Many researchers believe a “better together” policy is going to profit both players rather than a stealing business strategy.
Clearly, the young generation of banking customers is in need of a better digital experience. It has led the traditional banks to collaborate with these Fintech companies. With banking giants recognizing the potential of this new branch of technology, the demand for well-equipped experts is expected to reach new heights. You can prepare for this lucrative opportunity ahead through various Fintech courses available.